May 25, 2011
CFTC Sanctions Cadent Financial Services LLC $125,000 for Supervision Violations
Chicago-based Cadent failed to supervise diligently its employees’ handling of customer orders.
Washington, DC ― The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled charges against Cadent Financial Services LLC (Cadent), a registered Chicago, Ill.-based futures commission merchant, for failing to supervise diligently its employees and associated persons (APs) in their handling of commodity futures orders of a guaranteed introducing broker (GIB) of Cadent and the GIB’s AP, sole principal and owner.
The CFTC order imposes a $125,000 civil monetary penalty and a cease and desist order on Cadent.
The CFTC order finds that, from February 2007 through at least October 2007, the GIB’s AP engaged in an unlawful trade allocation scheme for his personal benefit and to the detriment of the GIB’s customers and that of a commodity pool operated by the GIB’s AP. The AP allocated post-execution trades and, therefore, was able to allocate the profitable or more profitable trades to his personal accounts and the unprofitable or less profitable trades to GIB customer accounts or the pool account, according to the order.
The order finds that Cadent failed to follow procedures it had in place concerning the lacement of bunched orders by account managers and failed to ensure that it always received a post-allocation plan prior to or contemporaneously with the GIB’s AP’s filing of bunched orders. Cadent also permitted the GIB’s AP to make continual account changes to any allocations made, the order finds.
Moreover, the order finds that Cadent failed to adequately respond to numerous indicators of questionable activity and to investigate whether the GIB’s AP’s post-execution allocations were detrimental to Cadent’s customers. Cadent also routinely allowed the GIB’s AP to change account numbers for allocations, at times, several days after the trade date, the order finds.
CFTC Division of Enforcement staff responsible for this case are Kevin S. Webb, Michelle S. Bougas, Heather N. Johnson, James H. Holl, III, Gretchen L. Lowe and Vincent A. McGonagle.
Last Updated: May 25, 2011